A Guide to Financial Planning Negligence

By | April 30, 2018

Financial advisors and planners carry a lot of responsibility. Any negligence linked to providing financial advice to clients could have severe consequences. If the negligence can be proven, a client can take a financial advisor from court and demand compensation for their losses.

In order to determine whether you’re entitled to legislative action against a financial planning professional, you will first have to understand the definition of negligence in the field.

Financial Planning Negligence: An Overview
Financial planners have to adhere to legal requirements and industry standards when making suggestions. Thus, market fluctuations that lead to losses or other circumstances that aren’t under the control of the planner do not constitute negligence.

Negligence occurs whenever a planner makes suggestions that are not suitable for the needs of the respective client, when there isn’t sufficient diversification to manage risks or if the planner makes a suggestion for investment in a bad fund.

There are numerous other examples of situations that will qualify as negligence on behalf of a financial planner. Here are a few of these examples:

* You get a suggestion to borrow too much for the purpose of completing a trade
* The planner recommends or conducts trade on behalf of the client for the purpose of increasing their own commission
* Fraudulent planning takes place
* Getting a suggestion to invest in real estate when the planner knows such an investment is way out of your budget
* Recommending financial products for the sole purpose of getting commission on those
* A failure to inform a client of all the risks involved in a certain investment strategy or trade option
*A failure to acquaint clients with alternative investment strategies for the purpose of letting them make an informed decision

What it Takes to Prove Financial Planning Negligence
Proving that a financial planner has been negligent is not always going to be a straightforward task. The reason is simple – losses can occur even when a planner has done their job perfectly. A client that has not been informed thoroughly of the risks, however, can undertake actions against their financial planner.

You will need to focus on a couple of essentials to prove that financial planning negligence has occurred.

For a start, it’s important to establish that you haven’t received a key service or a piece of information from your financial planner. Negligence can also be established by providing evidence that you have suffered financial losses because of the negligence and that another financial advisor would not have provided similar suggestions under the same circumstances.

In a sense, you have to show that the financial planner breached their responsibility and that your loss resulted from this breach. Obviously, establishing such a connection will necessitate some investigative work.

If you believe that you have a claim against your financial planner, it’s imperative to seek legal assistance. Most lawyers practicing in this area will offer potential clients a free of charge first consultation. Thus, you can have your questions answered without worrying about the cost of legal assistance.

Building a strong case will make it possible for you to get compensated for your losses. Most often, successful claimants are compensated so that they can return to the financial status they enjoyed before the losses occurred. Still, the process is a long and convoluted one, which is why you will have to opt for an experienced and knowledgeable legal representative.